Bank and Broker Default Risk

Below we provide the current default risk of the major banks and brokers around the world as measured by their 5-year credit default swaps (this is the one-year cost to insure the company's bonds over the next five years).  As shown, Lehman's (LEH) CDS price is currently the highest at 249.2, followed by Merrill (MER) at 196 and Wachovia (WB) at 189. 

Investors are much more worried about US banks and brokers than they are the foreign ones.  RBS (RBS), Barclays (BCS), Soc. Gen. (SCGLY.PK), Deutsche Bank (DB), Banco Santandar (STD), BNP Paribas (BNPQY.PK) and HSBC (HBC) are all at the bottom of the list. 

While default risk is still elevated for these firms, it is still much lower than it was in mid-March just before the Bear Stearns (BSC) bailout.  Lehman's CDS price was all the way up at 450 back then, so it is down 44% at current levels. 

While default risk is down across the board, stock prices are down significantly as well for many of these firms.  Lehman is down another 38% since 3/14, Merrill is down 13%, Bank of America (BAC) is down 21%, and Wachovia is down 33%.  Some stock prices are up, however.  Morgan Stanley (MS) and Citi (C) are up slightly, while Goldman (GS) is up nearly 20%.

click to enlarge

Comments

[Arthur Cutten:]

The Fed's bailout of Bear Stearns favored the creditors but not the shareholders, a fact obviously and correctly reflected in this chart.

2008 Jun 22 07:53 PM

[haubews:]

Thanks for the information. Is there a clearing house for this info?

www.markit.com/informa...
appears to be across all industries

2008 Jun 22 09:51 PM